British Airways takes the plunge

Having sat quietly (in public) on the Airbus A380 and Boeing 787 debate for a long time, British Airways has finally committed to $8 billion worth of new large airliners. It's ordered 12 A380s and 24 787s.

Financially this is clearly a very big deal but its significance goes much further.

The biggest news here is the A380 decision. Though BA finally became an Airbus customer in the late 80s, it's never before flown any wide body Airbus, famously ignoring (much to the irritation of the French, Germans and British Aerospace) the original A300 and then the A330 and A340 which went on to replace and extend Airbus's large and long haul product line.

Airbus selling some more A380s is fantastic news for the manufacturer, particularly as they will take over the role currently played by the most in-demand portion of BA's 747-400 fleet. BA has 57 of these, the largest 747-400 fleet in the world. The subtext here is that BA has chosen to go with A380s rather than Boeing's 747-8, a significant redesign of the 40 year old product that turned long haul travel from an exclusive to a mass exercise. Likely to enter service in 2009, the updated jumbo would have been a safe and quite reasonable decision for BA, and an evolution of its fleet. It now seems less likely (though not impossible) that British Airways will order more 747s, a plane it first introduced into service in its early form in 1971.

BA's long haul fleet has been dominated by the Boeing 747 for decades. This was early 80s BA. Vol au vent and a babycham anyone?

What we're finally seeing is endorsement of both manufacturers' arguments. Boeing has promoted the 787 by insisting that in future more flights will go long haul point to point - so from slightly smaller airports to either hubs or slightly smaller airports. Airbus has argued that congestion means bigger planes will be needed to fly between big hubs. It's been obvious for some time that the reality is a combination of the two trends.

For those interested in a bit of historical trivia, the deal represents a significant shift towards Airbus for the airline. In the days when Children Were Seen But Not Heard and National Airlines Bought Home-Grown Planes, the airline (and its forerunners BEA and BOAC) spent years trying to persuade the British government to let it buy American aircraft. Instead of getting its preferred Boeing 737s and 727s in the late sixties, it was forced to buy underpowered BAC One Elevens and the wonderful, but inefficient and underpowered Trident 3 (the airline's pilots use to joke the Trident only took off due to the curvature of the earth). It won out in 1978, buying 737s and became a launch airline for the 757 in '79, which replaced the Trident rather in the manner that a shotgun might replace a catapult.

By the 70s there weren't any British long haul airliners on sale, so a policy of mainly Boeing (from BOAC) plus Lockheed (from BEA) saw the fleet dominated by American hardware, and despite repeated attempts to sell the Airbus A300, via both patriotic guilt and economic arguments, it never happened.

It was only in 1987, when the airline bought British Caledonian, that it accidentally became an Airbus customer, inheriting that airline's launch order for the Airbus A320, which of course was quite the moderne thing to pick up at the time. Since then BA's A320 (and smaller A319 and larger A321) have gradually grown as a fleet to become BA's dominant short haul aircraft, with about 70 flying. Meanwhile 737 and 757 fleets have shrunk dramatically. The 757 is out of production (though quite a handy thing to have around because it has very flexible economics, being good at very short or very long sectors I believe). The 737 is being phased out of the fleet, probably in 2008.

The point here is that Airbus is on the ascendent in both the long and short haul BA fleets, with Boeing seeming to have no chance of grabbing any small airliner sales and the large and long haul fleet being a Boeing and Airbus mix for the first time ever.

One chance for Boeing might be to sell the 787-3, an intriguing short haul (but large) airliner prospect that Boeing has to date only sold to the Japanese. It's not clear today whether the deal includes any such variant, though it's unlikely given the announcement talking of the long-haul fleet. This product is Boeing's real game-changer and ironically picks up where the original Airbus A300 left off. The thinking in the late 60s and early 70s was that basic economics would mean we would increasingly fly relatively short distances in much larger aircraft - perhaps holding two or three hundred people. This happened for a bit, but over time the low cost revolution has led to lots more flights, all in relatively small A320s or 737s. The situation is most obvious in the United States. It was common in the 70s to fly New York to Los Angeles in a 747, but nowadays you'll probably find yourself in a JetBlue A320. Boeing argues that shifting back to bigger planes makes sense. It makes economic sense, it makes environmental sense and it tackles congestion. I think Boeing's right, but it might be ahead of the airlines here - and buying big planes is harder than buying small, especially in a credit crunch.

BA's new fleet will take some time to arrive, one of the downsides of sitting on the fence for so long while blaming the cabin crew. And there may be other moves to come, as this order only replaces 34 planes in a fleet of over 120 large jets. In the meantime, we can continue to feel its 747s get ever more elderly. Its first entered service 18 years ago.

Posted by Mark Charmer.Anyone wanting to read up on the aircraft manufacturer battle over the years should read John Newhouse's great book, Boeing Versus Airbus. Graziano Freschi's book on the BAC Three-Eleven, though badly structured, is a fascinating insight into the politics behind the development of the Airbus consortium, and the shift in European airliner leadership from the old 1960s UK centres of expertise to France and Germany, making Airbus what it is today.